MORGAN STANLEY: Here are 20 companies that are best exposed to the growing space economy

The final frontier is airless, cold, and full of harmful radiation. But, for some companies, it could also be full of profits.

We, as a species, are starting to explore space more than ever. Titans of industry, like Jeff Bezos and Elon Musk, are developing new space technology for the transportation of humans and cargo. Spaceflight is getting cheaper, which is leading to more and more opportunity above the earth.

By the year 2040, the space industry could reach $1.1 trillion, according to a recent note from Morgan Stanley. Growing need for internet access around the world could be a big driver for the nascent space economy. Some companies, like Google and Facebook, are working on sending drones and balloons into the sky to provide fast internet to remote areas, but Adam Jonas, an analyst at Morgan Stanley, says the future of the internet is a network of satellites.

The companies currently working on providing internet to underserved areas stand to heavily benefit from more internet consumers. Jonas expects an untapped $725 billion in revenue from social media, search, and e-commerce companies.

Space is almost unfathomably large, though. There is lots of room for companies to carve their own niche above Earth's atmosphere and to take advantage of satellites beaming the internet into new places on earth. Jonas, with the help of his colleagues at Morgan Stanley, picked 20 publicly traded companies he thought would benefit the most from the growing space economy. He listed them in no particular order, but they are as follows.

Lockheed Martin (LMT)

Reasoning: "Lockheed Martin participates across all segments of the value chain, including satellites (AEHF), launch (United Launch Alliance), and ground systems. The company primarily caters to the US government with exposure to NASA and the DoD amongst others. In recent years, the company has made several investments focused on space, including a $300M refresh of its family of satellites concluded in 2017"

SES Global

Reasoning: "SES is the world's second largest fixed satellite services operator, with operations around the world. The company has 12 medium Earth orbit (MEO) satellites in service, plans to launch 8 satellites in 2018 / 2019, and 7 super power satellites from 2021"

Northrop Grumman (NOC)

Reasoning: "Northrop Grumman participates in the development and manufacturing of both satellite payloads (the sensor system for SBIRS), as well as full up satellites (for example, JWST). With the recently announced acquisition of Orbital ATK, the company stands to add launch to its capability set, as well as extend its satellite business to smaller platforms."

Inmarsat

Reasoning: "Inmarsat is a traditional mobile satellite services operator specializing in connectivity services for those in remote areas. There are opportunities and risks from the latest space developments. On the one hand, we see a higher risk of new entrants, which is evident with Viasat becoming a serious competitor in in-flight connectivity. On the other hand, the demand for connectivity ought to be advantageous to Inmarsat's core maritime business, where the barriers to entry are higher (for example, development of drone ships for long haul maritime routes)."

GoDaddy (GDDY)

Reasoning: "GoDaddy is focused on providing technology to enable web presence for small to medium sized businesses and is the largest scaled vendor in markets with low barriers to entry and high barriers to scale. The company estimates that over 50% of SMBs in the U.S. do not have a web presence with this number increasing to 70% globally. In addition to its scale, GoDaddy's competitive advantages include better breadth, functionality, and reliability relative to its peer group. While performance in the U.S. remains stable, international expansion into underserved geographies remains a substantial opportunity for incremental growth and profitability"

Shopify (SHOP)

Reasoning: "Shopify offers a platform that enables merchants to build and use online storefronts with little to no technology expertise required. The platform's scalability, ease of use, and low cost has enabled the company to maintain the fastest growth rate among our global Software coverage universe. Low cost of failure offered by Shopify's platform has been a catalyst for small entrepreneurs to pursue opportunities they otherwise never would have with economics that have also attracted large enterprises, further expanding its addressable markets. While Shopify has only recently targeted expansion into major international markets, pent up global demand for its platform is implied by adoption in emerging markets the company has not yet targeted or supported."

Amazon (AMZN)

Reasoning: "Amazon is the global e-commerce leader with operations in developed and developing countries. At a high level, increased global internet connectivity is likely to lead to rising e-commerce adoption, which will move more consumer dollars into Amazon's ecosystem."

Facebook (FB)

Reasoning: "Facebook's revenue growth is driven by growth in users (now at 1.3b daily active users), engagement (now at ~55 minutes / user / day), and sophisticated data analytics / targeting to serve high quality content and ads to its users. As such, the ~2b current global internet users not on Facebook and 3b+ people not online are potential material drivers of long term growth."

Alphabet / Google (GOOGL)

Reasoning: "Google has seven platforms with 1b+ users. We see rising internet penetration, bringing the next 3b+ people online and improving global internet connectivity, leading to stronger adoption and monetization of Google's products, including the Android ecosystem, paid search and YouTube."

Honeywell International (HON)

Reasoning: "Honeywell is a leader in avionics, thermal control, environmental control and life support systems for the Human Space market, and has been part of every NASA manned space mission. The company also has a stronger expertise in developing and manufacturing satellite hardware for both military and commercial applications, and provides guidance, propulsion, steering and utility control systems for launch vehicles. Honeywell also acquired a satellite communication component manufacturer, Com Dev (~$160M Revenue) in 2015, which management believes is well positioned to benefit from rising demand for higher bandwidth and growth in the small satellite market"

United Technologies (UTX)

Reasoning: "United Technologies' Aerospace System business is a prime contractor of NASA's space suit / life support system. The company also produces environmental control, life support, power management and distribution, and thermal control systems for the International Space Station and the Orion crew exploration vehicle"

XL Group

Reasoning: "XL Group is one of the top underwriters of space insurance, providing insurance coverage for launch and in-orbit events. We see room to grow this line of business, as launches become more frequent, and there is a higher probability of potential damage that could occur while in-orbit. Due to the unique nature of this line, XL can apply their expertise to underwrite more profitably than its space insurance competitors."

Boeing (BA)

Reasoning (if provided): "Boeing participates most heavily in the satellite and launch components of the space value chain. The company caters to a host of end-customers, from commercial companies seeking communication satellites (ViaSat) to sensitive US Government entities seeking classified capabilities (X-37). The company provides launch through the United Launch Alliance joint venture with Lockheed Martin"